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Compaq, DirecPC in satellite deal

Compaq will soon start offering customers the option of obtaining Internet access via satellite, the third leg in the PC maker's faster connection push.

Compaq will soon start offering customers the option of obtaining Internet access via satellite, the third leg in an overall company strategy to promote faster connections to the Net.

Compaq Computer will start offering by mid-April the ability to order satellite data services from DirecPC for custom configured PCs via kiosks in stores and its Web site, said sources. Internet access through a satellite hook-up provides download speeds of up to 400 kilobits per second, while information is sent out over regular telephone lines at up to 33.6 kbps.

The initiative is the third leg of the company's "Triple Play" strategy to link users with high speed Internet services. Compaq already offers PCs configured for cable and DSL connections (digital subscriber line) and has signed deals with respective carriers so consumers can obtain these services.

Compaq last year launched its broadband initiative and announced DirecPC as a partner. The company already provides a link from its site to DirecPC's Web site, but the new program will simplify the buying process.

Also, a universal serial bus (USB) adapter needed for the service will ease the installation process, said sources, which the companies hope will encourage more users to sign on to the service. Additionally, Compaq is expected to detail plans for connecting home networks to the service.

Compaq and DirecPC declined to comment on unannounced products.

With a push from Compaq, the world's largest PC maker, the market for satellite services is set to gain some measure of credibility as a viable alternative to other ways of getting on the Net.

"There is a decreasing gap between cost of cable, DSL, and satellite 'modem' services," which will make the satellite service an increasingly popular option for consumers and business users, said Richard Doherty, president of The Envisioneering Group. One of the main attractions: Satellite dishes can be installed in places cable service can't reach, Doherty said.

Currently, users pay $299 for the needed additional hardware plus a monthly service fee that starts at $30 a month. With the current rebate program for new customers, the hardware is priced at $199.

No two-ways about it
But satellite hasn't kept pace with cable and DSL providers such as @Home and SBC Communications, in terms of subscriber numbers.

"The inability to do two-way communications [through the satellite network] has been a big deterrent, said Carol Mann, an analyst with Strategis Group. Satellite services rely on the phone network to send requests for information back to the Internet, which means consumers either still tie up a phone line to get access, or bear the added cost of installing a second separate phone line.

Hughes Electronics, the parent company of DirecPC, is looking to boost its competitive position by investing $1.6 billion to build two-way data services over satellite networks. The company expects to make such services available in North America by 2002.

With two-way networks in place, Hughes is saying it will be able to offer services such as desktop videoconferencing at lower cost than land-based systems.

"DirecPC is trying to gain exposure with other manufacturers such as Dell and possibly Toshiba," said Brian Badding, senior analyst with the Carmel Group. "The main goal is to obtain distribution agreements to get more exposure out of their product," he added. DirecPC has had most of its success in the small to mid-size business market, but even then has only shipped about 70,000 units worldwide, according to his analysis.